REPORT NO. 2009-160 M ARCH 2009 UNIVERSITY OF CENTRAL FLORIDA Financial Audit For the Fiscal Year Ended June 30, 2008 This is trial version www.adultpdf.com BOARD OF TRUSTEES AND PRESIDENT Members of the Board of Trustees and President who served during the 2007-08 fiscal year are listed below: Board Member Richard Walsh, Chair Thomas Yochum, Vice-Chair Judith Albertson Logan Berkowitz from 5-08-08 (1) Olga Calvet Dr. Manoj Chopra (2) Patrick Christiansen Alan S. Florez Michael Grindstaff from 3-18-08 (3) Brandie Hollinger to 5-07-08 (1) Phyllis Klock Richard Nunis to 1-08-08 (4) Harris Rosen Conrad Santiago Al Weiss Dr. John C. Hitt, President Notes: (1) Student body president. (2) Faculty senate chair. (3) Not yet approved by the Florida Senate. (4) Position was vacant from January 9, 2008, through March 17, 2008. The Auditor General conducts audits of governmental entities to provide the Legislature, Florida’s citizens, public entity management, and other stakeholders unbiased, timely, and relevant information for use in promoting government accountability and stewardship and improving government operations. The audit team leader was James H. Cole, CPA, and the audit was supervised by Brenda C. Racis, CPA. Please address inquiries regarding this report to James R. Stultz, CPA, Audit Manager, by e-mail at jimstultz@aud.state.fl.us or by telephone at (850) 922-2263. This report and other audit reports prepared by the Auditor General can be obtained on our Web site www.myflorida.com/audgen ; by telephone at (850) 487-9024; or by mail at G74 Claude Pepper Building, 111 West Madison Street, Tallahassee, Florida 32399-1450. This is trial version www.adultpdf.com MARCH 2009 REPORT NO. 2009-160 UNIVERSITY OF CENTRAL FLORIDA TABLE OF CONTENTS PAGE NO. EXECUTIVE SUMMARY i INDEPENDENT AUDITOR’S REPORT ON FINANCIAL STATEMENTS 1 MANAGEMENT’S DISCUSSION AND ANALYSIS 3 BASIC FINANCIAL STATEMENTS Statement of Net Assets 11 Statement of Revenues, Expenses, and Changes in Net Assets 13 Statement of Cash Flows 14 Notes to Financial Statements 16 INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF THE FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS 39 Internal Control Over Financial Reporting 39 Compliance and Other Matters 40 PRIOR AUDIT FOLLOW-UP 41 This is trial version www.adultpdf.com MARCH 2009 REPORT NO. 2009-160 and cash flows thereof for the fiscal year then ended, in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report on our consideration of the University of Central Florida’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, rules, regulations, contracts, and grant agreements and other matters included under the heading INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF THE FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS . The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. The MANAGEMENT’S DISCUSSION AND ANALYSIS on pages 3 through 10 is not a required part of the basic financial statements, but is supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Respectfully submitted, David W. Martin, CPA February 26, 2009 -2- This is trial version www.adultpdf.com MARCH 2009 REPORT NO. 2009-160 MANAGEMENT’S DISCUSSION AND ANALYSIS The management’s discussion and analysis (MD&A) provides an overview of the financial position and activities of the University for the fiscal year ended June 30, 2008, and should be read in conjunction with the financial statements and notes thereto. This overview is required by Governmental Accounting Standards Board (GASB) Statement No. 35, Basic Financial Statements–and Management’s Discussion and Analysis–for Public Colleges and Universities, as amended by GASB Statements Nos. 37 and 38. On March 18, 2008, the name of the UCF Health Facilities Corporation (a University direct-support organization) was changed to the UCF Finance Corporation. This entity is a component unit of the University, and its financial information was blended into the University financial statements. Wherever necessary, this entity’s financial information is identified in the comparative information noted below in the discussion of the variances between the 2007-08 and 2006-07 fiscal years. The MD&A, and financial statements and notes thereto, are the responsibility of University management. OVERVIEW OF FINANCIAL STATEMENTS Pursuant to GASB Statement No. 35, the University’s financial report includes three basic financial statements: the statement of net assets; the statement of revenues, expenses, and changes in net assets; and the statement of cash flows. The financial statements, and notes thereto, encompass the University and its component units. These component units include: ¾ Blended Component Unit • The UCF Finance Corporation ¾ Discretely Presented Component Units • The University of Central Florida Foundation, Inc. • The University of Central Florida Research Foundation, Inc. • The UCF Athletics Association, Inc. • The UCF Convocation Corporation. • The Golden Knights Corporation. Information regarding these component units, including summaries of their separately issued financial statements, is presented in the notes to the financial statements. This MD&A focuses on the University, excluding the component units. For those component units reporting under GASB standards, MD&A information is included in their separately issued audit reports. FINANCIAL HIGHLIGHTS The University’s assets totaled $1,130.1 million at June 30, 2008. This balance reflects a $142.8 million, or 14.5 percent, increase from the 2006-07 fiscal year. Liabilities increased by $17.8 million, or 5.5 percent, totaling $340 million at June 30, 2008, compared to $322.2 million at June 30, 2007. As a result, the University’s net assets increased by $125 million, reaching a year-end balance of $790.1 million. -3- This is trial version www.adultpdf.com MARCH 2009 REPORT NO. 2009-160 The University’s revenues totaled $786.8 million for the 2007-08 fiscal year, representing a 9.7 percent increase over the 2006-07 fiscal year due mainly to the University’s continued enrollment growth, continued growth in sponsored research, and an increase of capital donations for the College of Medicine. Expenses totaled $661.8 million for the 2007-08 fiscal year, representing an increase of 5.9 percent over the 2006-07 fiscal year. T HE STATEMENT OF NET ASSETS The statement of net assets reflects the assets and liabilities of the University, using the accrual basis of accounting, and presents the financial position of the University at a specified time. The difference between total assets and total liabilities, net assets, is one indicator of the University’s current financial condition. The changes in net assets that occur over time indicate improvement or deterioration in the University’s financial condition. The following summarizes the University’s assets, liabilities, and net assets at June 30: 2008 2007 Assets Current Assets 362,778$ 302,923$ Capital Assets, Net 628,837 571,465 Other Noncurrent Assets 138,520 112,979 Total Assets 1,130,135 987,367 Liabilities Current Liabilities 88,935 73,117 Noncurrent Liabilities 251,088 249,089 Total Liabilities 340,023 322,206 Net Assets Invested in Capital Assets, Net of Related Debt 480,871 425,445 Restricted 168,169 143,096 Unrestricted 141,072 96,620 Total Net Assets 790,112$ 665,161$ Condensed Statement of Net Assets (In Thousands) Total current assets increased by $60 million from the prior year mainly due to increases in investments of $43.5 million and amounts due from state of $15.6 million. The University had significant construction activity during the year. Major construction projects currently in progress include the (1) Burnett Biomedical Science Center, (2) Physical Science Building, (3) Medical School, and (4) Arts Complex II. These four projects represent 95 percent of the University’s construction in progress as of June 30, 2008, and accounted for the $57 million increase in capital assets. -4- This is trial version www.adultpdf.com MARCH 2009 REPORT NO. 2009-160 T HE STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS The statement of revenues, expenses, and changes in net assets presents the University’s revenue and expense activity, categorized as operating and nonoperating. Revenues and expenses are recognized when earned or incurred, regardless of when cash is received or paid. The following summarizes the University’s activity for the 2007-08 and 2006-07 fiscal years: 2007-08 2006-07 Operating Revenues 291,414$ 261,272$ Operating Expenses 627,251 589,085 Operating Loss (335,837) (327,813) Net Nonoperating Revenues 366,566 347,537 Income Before Other Revenues, Expenses, Gains, or Losses 30,729 19,724 Other Revenues, Expenses, Gains, or Losses 94,222 72,788 Net Increase in Net Assets 124,951 92,512 Net Assets, Beginning of Year 665,161 572,649 Net Assets, End of Yea r 790,112$ 665,161$ Condensed Statement of Revenue, Expenses, and Changes in Net Assets (In Thousands) The increase in net assets of $125 million is the result of several factors. Major increases in revenue were as follows: ¾ Grants and contracts increased by $18.3 million, or 20.1 percent. ¾ Net student tuition and fees increased by $9.2 million, or 7.7 percent. ¾ Capital grants, contracts, and donations increased by $19.4 million. ¾ Federal and State student financial aid increased $8.7 million, or 10.8 percent. Operating Revenues GASB Statement No. 35 categorizes revenues as either operating or nonoperating. Operating revenues generally result from exchange transactions where each of the parties to the transaction either give up or receive something of equal or similar value. -5- This is trial version www.adultpdf.com . version www.adultpdf.com MARCH 2009 REPORT NO. 2009- 160 UNIVERSITY OF CENTRAL FLORIDA TABLE OF CONTENTS PAGE NO. EXECUTIVE SUMMARY i INDEPENDENT AUDITOR’S REPORT ON FINANCIAL STATEMENTS. REPORT NO. 2009- 160 M ARCH 2009 UNIVERSITY OF CENTRAL FLORIDA Financial Audit For the Fiscal Year Ended June 30, 2008 This is trial version www.adultpdf.com BOARD OF TRUSTEES. result, the University s net assets increased by $125 million, reaching a year-end balance of $790.1 million. -3- This is trial version www.adultpdf.com MARCH 2009 REPORT NO. 2009- 160 The University s